Difference between Revenue Reserve and Capital Reserve

Here we detail about the difference between revenue reserve and capital reserve.

Revenue Reserve:

1. It is created out of revenue profits.

2. It cannot arise during the pre-incorporation period

3. It is created by retaining profit.

4. It can be used for payment of dividends without any precondition.

5. It is created to strengthen the financial position, to meet unforeseen contingencies or some other specific purposes.

Capital Reserve:

1. It is created out of capital profits.

2. It may arise during the period prior to incorporation.

3. It is not created by retaining profit.

4. It can be used for payment of dividend only when certain conditions of Companies’ Act are satisfied.

5. It is created to meet capital loss or for compliance of legal requirements or accounting practices.

shopify traffic stats